Revision: Corporate Organisation, Finance and Trade >> Sources of Business Finance Business Studies Commerce (English Medium) Class 11 CBSE

Business finance means money or funds required and used by business firms. In the words of Ronald Burns, “financing is the process of organising the flow of funds so that a business can carry out its objectives in the most efficient manner and meet the obligations as they fall due.”

• According to section 2(30) of the Companies Act, 2013, " Debenture includes debenture stock, bonds and any other securities of a Company, whether constituting a charge on the assets of the Company or not." 
• “A Debenture is a document given by a company as evidence of a debt to the holder, usually arising out of a loan and most commonly secured by a charge." -Topham
• According to Evelyn Thomas, "a debenture is a document under the company's seal which provides for the payment of a principal sum and interest thereon at regular intervals, which is usually secured by a fixed or floating change on the company's property or undertaking and which acknowledges a loan to the company".

• “A bank collects money from those who have it to spare or who are saving it out of their incomes and it lends this money to those who require it.” — Crowther
• “Bank means accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft or otherwise.” — According to Indian Companies Act, 1949
• Banking Regulation Act of 1949: “Banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, demand draft, order or otherwise.”
• Prof. Cairncross: “A bank is a financial intermediary, a dealer in loans and debts.”

A. When the Issue Price is Payable in Lump Sum:

1. On Receiving Application Money:

Bank A/c                             ...Dr.

   To Shares Application A/c /  Shares Application and Allotment A/c 

(Being the application money received in a lump sum)

Or if a joint account is used:

Bank A/c           ...Dr.

         To Shares Application and Allotment A/c

(Being the application and allotment money received in a lump sum)

2. On Allotment of Shares (Transfer of Application Money):

Shares Application A/c / Shares Application and Allotment A/c    ...Dr.

       To Share Capital A/c

(Being the transfer of application money to share capital on allotment)

Or (if joint account used):

Shares Application and Allotment A/c         ...Dr.

       To Share Capital A/c

(Being the application and allotment money transferred to share capital)

B. When Issue Price is Payable in Instalments:

1. On Receipt of Application Money:

Bank A/c                              ...Dr.

      To Shares Application A/c

(Being the application money received)

2. On Allotment of Shares (Transfer of Application Money):

Shares Application A/c                  ...Dr.

      To Share Capital A/c

(Being application money transferred to share capital on allotment)

3. On Amount Due on Allotment:

Shares Allotment A/c                 ...Dr.

       To Share Capital A/c

(Being allotment money due)

4. On Receipt of Allotment Money:

Bank A/c           ...Dr.

      To Shares Allotment A/c 

(Being the allotment money received)

5. On Amount Due on First Call:

Shares First Call A/c                  ...Dr.

        To Share Capital A/c

(Being the amount due on the first call)

6. On Receipt of First Call Money:

Bank A/c                    ...Dr.

      To Shares First Call A/c

(Being the amount received on the first call)

7. (Optional) On Amount Due on Second Call:

Shares Second Call A/c      ...Dr.

      To Shares Capital A/c

(Being the amount due on the second call)

8. Bank A/c           ...Dr.

       To Shares Second Call A/c

(Being the amount received on the second call)

C. Other Related Entries:

1. For Money Refunded on Rejected Application:

Share Application A/c         ...Dr.

      To Bank A/c

(Being refund of application money on rejected shares)

2. For Adjustment of Excess Application Money towards Allotment:

Share Application A/c         ...Dr.

     To Share Allotment A/c

(Being excess application money adjusted towards allotment)

3. Combined Entry (Refund + Adjustment):

Share Application A/c       ...Dr.

      To Share Allotment A/c

      To Bank A/c

(Being excess application money adjusted and balance refunded)

• Debenture: A written promise by a company to repay a loan with interest.
• Legal View: Includes all debt instruments, as per the Companies Act, 2013.
• Key Features: Fixed interest, secured by assets, issued under seal, max 10-year term (30 for infrastructure).
• Debentureholders: They are lenders, not owners of the company.
• Bond vs Debenture: Bonds may have no fixed interest; debentures always do.

• Commercial banks are profit-seeking intermediaries connecting savers and borrowers.
• Their primary functions are accepting deposits and granting loans.
• India has 89 scheduled commercial banks divided into PSBs, RRBs, Private Banks, and Foreign Banks.
• Nationalisation in 1969 and 1980 expanded banking access to rural and priority sectors.
• SBI is India's largest bank — 25% market share, 45 crore customers, top 5 globally.
• RRBs serve rural India at lower interest rates and are the backbone of rural credit.
• Private and foreign banks drive technology, innovation, and competition in banking.
• Commercial banks are regulated by the Reserve Bank of India (RBI) and governed by the Banking Regulation Act, 1949.